Market slumps in early trade as rupee hits record low against dollar

Key benchmark indices edged lower in early trade as the rupee fell against the dollar to a record low as stronger than expected US job data fuelled expectations the US Federal Reserve will slow the pace of monetary stimulus later this year. Weakness in Asian stocks weighed on sentiment. The S&P BSE Sensex was down 230.84 points or 1.18%, up close to 80 points from the day's low and off about 160 points from the day's high. The market breadth, indicating the overall health of the market, was weak.

IT stocks rose as rupee hit record low against the dollar. Reliance Communications (RCom) edged higher after the company's board approved a proposal for demerger of the real estate assets held by RCom into a separate company to unlock substantial value for the company's shareholders. Ashok Leyland rose after the company said it has secured an order from the Institute of Road Transport (IRT), Tamil Nadu for the supply of 2,610 buses.

The rupee was trading at record low of 60.96 versus dollar, compared with Friday's close of 60.225/235.

At 9:30 IST, the S&P BSE Sensex was down 230.84 points or 1.18% to 19,264.98. The index declined 309.90 points at the day's low of 19,185.92 in early trade. The index fell 73.13 points at the day's high of 19,422.69 in early trade.

The CNX Nifty was down 76.60 points or 1.31% to 5,791.30. The index hit a low of 5,789.50 in intraday trade. The index hit a high of 5,833.85 in intraday trade.

The market breadth, indicating the overall health of the market, was weak. On BSE, 525 shares fell and 248 shares rose. A total of 32 shares were unchanged.

From the 30-share Sensex pack, 27 stocks fell and only three of them rose. Tata Motors (down 3.38%), Hindalco Industries (down 2.65%) and Sterlite Industries (down 2.08%), edged lower.

IT stocks rose as rupee hit record low against the dollar. Infosys (up 1.04%), Wipro (up 0.78%) and TCS (up 0.36%), edged higher. A weak rupee boosts revenue of IT firms in rupee terms as the sector derives a lion's share of revenue from exports.

Reliance Communications (RCom) jumped 3.61% to Rs 140.50. The company said on Sunday, 7 July 2013, that its board of directors has in-principle decided on a demerger of the real estate held by RCom into a separate unit to be called Reliance Properties, to unlock substantial value for the benefit of its shareholders. The stock hit 52-week high of Rs 146 in intraday trade today, 8 July 2013. The proposed separation of real estate into a separate unit is part of RCom's strategic plan to divest non-core assets, and focus on its core wireless and enterprise business. Reliance Properties will be a separate listed company. All shareholders of RCom will receive fully tradeable pro-rata shareholding in Reliance Properties, free of cost, based on their existing shareholding in RCom.

The preliminary and indicative monetisable value of RCom's real estate on development is estimated by independent valuers at over Rs 12000 crore ($2 billion), which is equal to Rs 60 ($1) per RCom share.

Reliance Properties will work with leading global partners to develop the real estate, and unlock this value for the benefit of its shareholders. The properties proposed to be developed by Reliance Properties include prime land at Dhirubhai Ambani Knowledge City, Navi Mumbai measuring nearly 135 acres, with saleable area of over 15 million square feet and prime property near Connaught Place, New Delhi measuring nearly 4 acres.

The board has constituted a committee to consider the matter in detail, and prepare the necessary Demerger Scheme, etc. in consultation with legal and other advisors. The demerger will be subject to approvals from shareholders, lenders, Courts, etc.

DLF shed 2.53%. The company on Saturday, 6 July 2013, said it has completed the Rs 325.38-crore deal to sell 150 megawatts (MW) wind turbine project in Gujarat to Bharat Light and Power. The transaction is in line with the DLF's objective of divesting its non core assets, the company said in a statement.

IDBI Bank fell 1.47%. The bank after market hours on Friday, 5 July 2013 said that the Government of India (GoI), Ministry of Finance, Department of Financial Services has, vide their letter dated 5 July 2013, appointed M. S. Raghavan as Chairman & Managing Director of IDBI Bank from 5 July 2013, for a period upto 30 June 2015, i.e., the date of his attaining the age of superannuation or until further orders, whichever is earlier.

Ashok Leyland rose 1.82% after the company after market hours on Friday, 5 July 2013, said it has secured an order from the Institute of Road Transport (IRT), Tamil Nadu for the supply of 2,610 buses. IRT is a nodal organization that procures buses for all transport corporations in Tamil Nadu.

Asian stocks dropped on Monday, 8 July 2013, amid concern a credit squeeze in China will curb growth and after a better-than-forecast monthly US jobs report fueled speculation that the Federal Reserve may begin reducing stimulus this year. Key benchmark indices in China, Hong Kong, Indonesia, Singapore, South Korea and Taiwan shed by 0.55% to 2.06%. Japan's Nikkei Average rose 0.53%.

US stocks surged on Friday, 5 July 2013, after government data showed the nation added more jobs than forecast last month. The non-farm payrolls increased by 195,000 in June and the unemployment rate held steady at 7.6% as more people entered the workforce. Job growth in previous months also was revised higher. Federal Reserve Chairman Ben Bernanke on 19 June 2013 said that the central bank may taper the pace of its bond purchases, currently set at $85 billion a month, as early as this year if the economy continues to improve in line with its forecasts.

The minutes of Federal Open Market Committee's (FOMC) policy meeting held on 19 June 2013, will be released on Wednesday, 10 July 2013. The minutes may provide more insight into the Fed's outlook on monetary stimulus. Bernanke is also due to deliver a speech on that day.

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